New Homes Get Cheaper: Price Premium Fading in 30% of Large U.S. Cities

• Author: Audrey Conn
• Posted: 2025-08-12

For years, new-construction homes carried a hefty premium over existing homes. But that gap is shrinking fast, and in some markets, it’s disappearing altogether.

According to Realtor.com’s report, new home prices dropped year-over-year in 30 of the largest U.S. metros last quarter, signaling a shift that could put more buyers in the driver’s seat.

Read: Buyer’s Market Incoming? The 20 Cities Facing the Biggest Home Price Drops in 2025

Why New Homes Are Becoming More Affordable

Housing costs are still historically high, up more than 50% since the pandemic, but several factors are pushing new home prices down:

• Incentives from builders like mortgage-rate buydowns and design upgrades.

• Smaller, smarter floor plans that reduce costs without sacrificing functionality.

• Increased competition from existing home listings, which are also under pricing pressure.

Nationally, new builds still list for more overall ($450,000 vs. $418,000 for existing homes), but on a price-per-square-foot basis, they’re now cheaper ($218 vs. $226.56).

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Top 5 Markets With the Biggest New Home Price Drops

• Little Rock, AR – -15.6%

• Austin, TX – -8.5%

• Wichita, KS – -7.9%

• Jacksonville, FL – -7.8%

• Cape Coral, FL – -7.4%

Builders Are Getting Creative

To attract hesitant buyers, 61% of builders are offering incentives like Mortgage-rate buydowns that is to temporarily or permanently lowering interest rates.

While buydowns make monthly payments more affordable upfront, experts warn of possible payment shock if interest rates remain high after a temporary discount ends.

Buyer vs. Seller: Who Gains, Who Loses?

Builders/Sellers (Mostly Losing)

• Shrinking price premium over existing homes reduces profit margins.

• Incentives eat into builder earnings.

• Higher competition from resale homes.

• Oversupply risk in certain markets.

Buyers (Mostly Gaining)

• Lower prices in key metros mean better deals.

• Price-per-square-foot advantage over existing homes.

• Attractive incentives like rate buydowns and free upgrades.

• More efficient home designs for less money.

Why It Matters Now

If you’re a buyer, especially in the South or West, this could be your best shot at a new home without the usual markup.

If you’re a builder, aggressive pricing and incentives may be necessary to move inventory before rates or competition shift the market again.

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